HomeMy WebLinkAbout1983-06-30 City Council Summary MinutesCITY
COUNCIL
MINUTEc
CITY
or
ALTO
Special Meeting
Thursday, June 30, 1983
ITEM
Item #1, Confirmation of the Appointment
Richard L. Young as Director of Utilities
Item #2, Special Public Hearing re Cable
Communications and the Request for Proposal
Item #3, Cancellation_ of the July 5, 1983 City
4VUU' I i Meeting
Adjournment
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6/30/83
Special Meeting
Thursday, June 30, .19.133
The City Council of the City of Palo Alto met on this day in the
Council Chambers at City Hall, 250 Hamilton Avenue, Palo Alto, at
7:30 p.m.
PRESENT: Bechtel, Cobb, Eyerly, Fletcher, Klein
(arrived 7:36 p.m.), Levy, Witherspoon
ABSENT: Fazzino, Renzel
ITEM # 1 CONFIRMATION OF THE APPOINTMENT OF RICHARD L. YOUNG AS
R
Mayor Bechtel welcomed Mr. Young.
MOTION: Councilmember Cobb moved, seconded by Levy, to appoint
Richard L. Young as Director of Utilities.
MOTION PASSED unanimously. Fazzino and Renzel absent.
ITEM #2, SPECIAL PUBLIC HEARING RE CABLE COMMUNICATIONS AND THE
=OtSI FOR PROPOSAL
City Manager William caner proposed the Council take action on the
Request for Proposal (RcP) and on the latest draft of the Joint
Powers Agreement (JPA) which contained minor corrections resulting
from negotiations with nearby jurisdictions,. It contained no sub-
stantive changes to memorandum CMR:357.3 of mid -June. The central
features of the JPA were: 1) The Agreement authorized Palo Alto to
ssue the RFP for all signing jurisdictions; 2) It awarded a fran-
chise on their behalf; 3) It preserved the option to select a
municipal operation; 4) It created a Board, enabling cooperating
agencies participating in the system to have a voice in the admin-
istration, with Palo Alto as the lead agency for execution of the
franchise and the setting up of guidelines.
Norman Sinel, consultant for Arnold & Porter, said in mid -April a
process was established which collect for tentative approval of
minimal requirements by the Council. The RFP must be issued.
Potential applicants would be given 12 to 14 weeks to respond,. and
he hoped to have an evaluation report in mid -November comparing
risks and h_enef ts, first of the various private applicants and
then with various forms of municipal ownership. In late December
the Council would be asked to select a private company to nego-
tiate a franchise or choose a municipal participation model. He
asked ; the Council to authorize the issuance of the RFP on their
and the joint signators' behalf. The .RFP regutred--::private cable
companies to state how minimum requirements would be met; describe
their technical and service proposals, their financial capabili-
ties and ownership structure. The RFP set down requirements and
did not indicate to the companies how those should be met.
C ouncilmember Cobb asked if the JPA Agreeement would be invalid if
one of the JPA cities dropped out.
Mr. Sinel said if a city dropped out after the RFP was issued,
then Palo Alto should cooperate either with the remaining cities
or stand alone. Once the JPA had been signed, the Powers coulti
not withdraw. If a jurisdiction wanted to ii pt out of the agree-
ment, negotiationwould be more difficult but would not seriously
damage the process established.
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Mr. Lance said all jurisdictions in question had indicated great
interest. He replied the Council was asked to approve the JPA,'
and give the necessary latitude to make any non -substantive
changes requested by other jirisdict-ions.
Councilmember Cobb asked if Pa i o Alto could make a change after
another city had approved :he SPA.
City Attorney Diane Lee said reapproval of the JPA would depend on
the authoity given to their staff by the other jurisdictions, and
whether the changes were substantive or not.
Councilmember Cobb referred to page 14 of the document, "more than
an insubstantial impact on the operation of the system," and bas-
ically meant the parties could opt out. He asked for clarification
of "insubstantial"
Mr. Sinel said the agreement was loosely worded to make sure that
atter Palo Al eo had reached a decision, the parties joining were
willing participants. . If a private cable company was manager and
operato'•of the system, another jurisdiction would be hard pressed
to suggest there was substantial difference. If Palo Alto deter-
mined to build the system, use its employees and establish a con-
struction schedule, another jurisdiction should have the right to
withdraw.
Councilmember Cobb said if Palo Alto wanted to be creative regard-
ing the ownership model, it might invalidate the Agreement. . An
important matter, which appeared in both the JPA and in the sum-
mary on page l5, was the franchise fees, which must all go back
into the cable system. It was a very substantial policy decision.
and the City could use it as a revenue generator, with part of the
franchise fee going to the general fund. He asked if that were
legally impossible, and if his interpretation was correct.
City Manager Laner said at present (apart from legislation passed
in the Senate but which had not reachid the House)e, the Federal
Communications Commission (FCC) would authorize an increase of a
franchise fee from 3% to 5%, based on the City either showing a
comprehensive regulatory program or other cable related uses for
the funds that the Commission found acceptable. Current law
Mated the use of the 5% franchise fee must be cable related.
Councilmember Cobb said he gathered there were other ways in which
the fee: could be used as a General Funds revenue generator.
Mr. Sinel explained that if the portion of the S66 that dealt with
franchise fees became law, 5% could be used for any purpose. The
definition of "cable related" could be relatively broad, and the
allocation of regulatory funds used to support staff working for
cable.
Mr. Latter said a clear distinction should be made between the
franchise fee and other kinds of revenue possibly generated from a
cable system. Cable was not currently, treated as a utility, but
would be treated as one and would pey the general fund for ser-
vice obtained.
Councilmember Cobb said ,the $FP was very unspecific about perfor-
mance data, and instailation schedules. He felt minimum require-
ments should have been specified for.technical performance, con-
struction and time schedule.
Mr. Sinel explained it was in keeping with the; process and philo-
sophy of the earlier RF ' ,discussion. The City reserved its right
to have a re€atively open-ended .,franchise contract negotiation.
Engineers from the franchise company and the City would later
develop performance standards and construction schedule. His
company had successfully used this format, and ,it was in the
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interests.of cable companies to speedily complete the work. Per-
formance standards entailed neyotation, but a company would do its
best.` if requirements were first set then found impossible to
attain, the tendency was to become too soft. It should also be
shown the City was not bound by minimum requirements. He
described it as a back -imploded system, and said the intent was to
select the best qualified applicant.
Councilmember Cobb referred to page 35 of the second amendment,
"Joint Venture Option" on v fifty-fifty basis --and said he was
interested in joint ownership possibilities, but felt 50 percent
represented an arbitrary number. He asked why thej they used that
particular split.
Mr. Sinel said the model worked relatively well for allocating
cash to the City and tax benefits to the joint venture partner.
He estimated the company would receive in excess_of 23 percent
internal rate of return and the City would receive 65 percent of
the cash. He Considered the RFP addressed companies offering
creative solutions.
Mayor Bechtel asked for exanples of a broad interpretation of
cable related use of franchise fee money.
Mr. Sinel. suuuested the development of certain arltifatinr al "
social service programs benefiting the community, which were
needed, were currently funded from the general treasury and which
used a cable system. The FCC would have to be convinced of its
appropriateness. Given the imaginativeness of the City of Palo
Alto, that was probably the ;imit of what might be defined as
cable related.
Mayor Becntel asked if S66 were passed, would the limits be inter-
preted more broadly, and could the fees go into the General Fund.
Mr. Sinel said that was correct.
Councilmember Eyerly referred to Section 7, Termination, of the
JPA, "This agreement shall terminate ninety 90) days after the
expiration of the original term of any franchise..."
Senior Assistant City Attorney Anthony Bennetti explained that it
was contemplated to give other jurisdictions 90 days to opt into
the municipal system. They would then have to grant a franchise
to the City of Palo Alto, a Joint Venture Fund or some other
entity to operate.within their jurisdiction, so there would still
be a termination phase necessary for the JPA.
Councilmember Eyerly specified that if the Council decided on the
municipal system there would be a new Agreement.
Mr. Bennetti said there would either be a new JPA or an amendment
to the current one.
Mayor Bechtel asked Which city. had approved the, JPA.
Mr. Bennetti said he believed R z;herton had approved the RFP and -
the JPA.-
Councilmember Levy said he was not comfortable with the process.
It sounded as though when the responses to the RFP were received,
we would enter into another set of negotiations. He asked if ,
those were unsatisfactory, would they continue to negotiate with
that potential franchisee or contact another applicant.
Mr. Sinel, said that was a tactical decision. He emphasized many.
factors were involved in such major negotiations. Some trading
would be involved, i .e. ,. amount of security fund, type of bond,
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lease access, etc. No company should be able to treat it as a
sealed bid. The RFP made it clear that the City rese ed the
✓ ight to negotiate in good faith. .
Councilmember Levy asked why the subject of the negotiations could
not be part of the original RFP.
Mr. Sinel resporded the basic parameters of the negotiations were
part of the RFP. It stated that a state-of-the-art system to pro-
✓ ide services to all rr _;dents of the -service area was required.
The final document could be 30 to 150 pages with several appen-
dices, including specific construction plans and sequences, and a
series of provisions that had been hammered out together. He
envisioned that when an applicant had been targeted, guidelines
would be set forth for the negotiating teams. The RFP asked com-
panies to address the question of whether or not a universal
service made sense and asked evaluation of certain benefits pro-
✓ ided to the City. It could determine subscriber rates versus
subsidized portions. With that input, the Council could make
decisions on the direction to take. He thought the Council would
find five or ten such areas which would prove helpful, and retain
the rights to make trade -offs -which would thus become apparent.
Councilmember Levy asked when the proposals were received in mid-
N e, .emto , flow Iifaffy tat it,nvic3 ilu rf= to fo a 1 v N i f.li Lu l.huuse the
franchisee. He felt the matrix was be very complex.
Mr. Sinel said there were few variables, and his company would
advise on risks and benefits of the applicants. He expected a
matrix- with only five categories. If all of the companies
answered favorably in each, the best company over a 15 year period
would have to be determined. The answer should not be based on a
trivial point.
Councilmember Levy referred to the JPA and asked if companies were
required to submit proposals both as independent franchisees and
as operators with the City.
Mr. Sine! said they had the right to say they had no i nterest' i n a
Joint Venture, but would be required to respond, giving six rea-
sons why they felt it would not\ work.
Councilmember Levy asked for clarification of page 2 of Exhibit
VIII, concerning a joint venture with a fifty-fifty interest by
the City and a company. line'paragraph said the City would'contri-
bute its portion of the equity through cash and/or in kind ser-
vices. It also said it should be -assumed the City would make cash
payments to fulfill its equity requirements, and asked if there
was a conflict.
Mr. Sinel said the wording would be revised later. 'It was to be
interpreted that the City would put up half the equity which could
be provided in several ways.
Councilmember Levy asked if the City provided half the equity, why
did it get 65 percent of the cash.
Mr. Sinel euplained_.t is was because the City, unlike the company,
could net take advantage of tax benefits. The value of the bene-
fits to the company were good. Under that scheme they were allo-
cated 90 percentof the tax benefits.
Councilmember Levy -a-°sked if we could use tax free money to -finance
a Joint Ownership --could the City sell bonds.
Mr. Sinel said this was complicated. An Industrial Development
bond cannot be for more than $10 million, .but the service area in
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question mi yht require more. The amount could be raised from $1 D
to 42U inn : I ; on with an UUAG.
Cguncilmember Levy said he understood there was no obstacle to the
funds being raised on a tax free basis. No difficulty arose
because the City used tax free. funds to 'finance with a profit -
making joint partner.
Mr. Sinel said cities frequently participated by providing UDAG's
or other forms of low -interest or tax-exempt money. It was an
extremely complicated question whether that kind of joint venture
would work with any forms of bonds available to the City. The
question would be addressed in the evaluation report.
Counci linember Levy referred to Exhibit VIII, Schedules B-1 and 2,
which dealt with ownership by the City and a private operator. He
suprised by the lack of specificity in outlining management and
operational functions.
Mr. Sines reiterated that private companies were asked to first
state what they thought made sense and was fair.- That would not
prevent his company from providing the City with alternatives.
Cable companies often had experience -of management contracts. The
City should hear what they had to say without necessarily agreeing
with them.
Councilmember Levy said one reason to choose a municipally -owned
system would be because they could support it quite well. Presum-
ably, they would '. > looking for specific marketing _functions from
a company and he tnought they should at least stipulate the kinds
of functions they were not seeking.
Mr, Sinel said his company's view was that would prejudge the
various options for municipal ownership. The City could totally
own the system and have any combination of its marketing and pro-
gramming functions under contract. He felt it premature to box the
City in. The options available would be laid out in the evalua-
tion report. Negotiation for the functions needed could be worked
out later and he saw that as an iterativ.. process.
Councilriember Levy said he wanted to discuss that point later
because he was not convinced that was the best way of proceeding.
,Counciimember Klein addressed the evaluation process. He was
unclear from the City Manager's report hoo the staff and the con-
sultant'.would evaluate proposals and report back to the Council.
Mr. Sinel said they would evaluate the proposals and various forms
of -municipal participation models for the Council's consideration.
A report would be prepared and probably be simultaneously dis-
tributed to the Council, the companies, and the staffs of the
various jurisdictions. -His company would then meet with all of
them. Based on those meetings another report would be issued and
he assumed that each jurisdiction would retain the right to make
recommendations. His report would be a decision making tool only.
The City's staff would make a recommendation.
Mr. Zaner said, in addition to recommendations by the City staff;
they would perform the normal "overseeing" role. The City re-
viewed the work of consultants -and discu,esed it with them. When
the product_ was placed beforeethe Council, it was consistent with
the Council's requirements.
Couneilmember Klein asked for confirmation that it would be the
consultant's report the Council received, and not a compromise.
Mr. L n.er agreed they, woud be the consultant'se views and would
not be'filtered through the City Manager -Or staff--. He referred to
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the Golf Course report, when a me►lorandum ar compani ed the report
saying that -the City Manager's office took exception to what the
consultant said in certain areas.
Councilmember Klein said he was relieved to hear that. He did not
understand why, when makiny an evaluative analysis of the re-
sponses to the RFP, the applicants would not be ranked.
Mr. Sinel said they had found that non -qualifying applicants would
shake out.. Worthy applicants would have different strengths and
weaknesses and he felt the Council should decide on behalf of the
residents which risks should be taken. He felt that if the con-
sultants ranked the candidates it would make the Council's work
more difficult.
Councilmember Klein asked if Mre Sinel anticipated that his report
would say that of perhaps ten applicants, five did not meet the
requirements and should not be given further consideration.
Mr. Sinel said that if there were ten applicants, five of whom did
not meet the requirements, it would be obvious from the report
which ones those were.
Councilmember Klein asked if there would be a chart illustrating
Mr= Sinel said there would be a chart, but there would not be a
point system ranking them.
Councilmember Klein asked if it would be fair to say, regarding
q;a ; i f i ed app icants, that the report state, "for a system going
in such and such a direction, applicant ABC was best, however, XYL
was better."
Mr. Sinel said it could be like that, or it might run, "Company X
clearly had the best understanding of the community of all compan-
ies, and though its proposal had made the best service offer, its
financing mechanism had some risk attached. It would go to the
marketplace for limited partnerships. Company Y's service offer
was acceptable, but it is a corporation that guaranteed construc-
tion and was prepared to put all of the moneys into a separate
bank account. in that situation the consultants would say that
the financial condition of the first company hard some moderate
risks attached;_ in respect to the second, no risk was attached.
The service of the first company appeared to be better than the
other." The Council would have to make a decision as to how big -e
financial risk should be run. That was what he meant by "key"
decisions --ones to be settled by the Council.
Councilmember -Klein asked when the Franchise Review Board- could
override the Palo Alto City Council.
Mr. Bennetti s;id the Board could overrule it on any particular
issue brought before.it. It had been agreed -with the other''.juris-
dictions that the Palo Alto City Council would,be the administer-
ing agent of the JPA, workiny with staff of the- other jurisdic-
tions to reach a consensus or identify issues needing resolution.
The City _ Counci l would endorse or change the consensus or resolve
the issues, Any member of the JPA, that felt the City Council had
made a wrong 'decision could,ask .its governing body to vote to
refer the issue to the Franchise Review Board. Only then would
the Review Board convene and the issue be reviewed. The City
Council would be bound by that,. decision. The Franchise Review
Board would_: function as an Appeals Body if a member of the JPA
felt aggrieved.`
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Councilmember Klein asked if Mr. Bennetti felt comfortable with
that system if a inudici pa I ly owned or jointly operated system was
chosen.
Mr. Bennetti said a municipally Owned system would function dif-
ferently. At present the JPA allowed the Franchise Review Board
to review issues that were not delegated to the franchisee under
the franchise. In a municipally owned system Paic Alto would be
in the position of a franchisee in respect to other jurisdictions.
A franchise would have to be negotiated with them, and a document,
superseding the present one, might be- re,#u i red. Palo Alto would
be a franchisee rather than an administering body. He did not
think the agreement would be very applicable -for a municipal
option, but asked the Council to bear in mind that it• would need
to be renegotiated if it opted for municipal ownership. For a
Joint Venture option, alteration of the agreement might not- be
necessary, as a cable company would manage and operate like a
franchisee --in fact, a franchise would be granted to the joint
venture, in which Palo Alto might have only a financial interest.
If Palo Alto operated the system, the City Council would need to
control those employees operating and managing the system. Those
decisions were not appropriately reviewed by the Franchise Review
Board and the issues would need to be clearly spelled out«
Councilmember Klein agreed but felt that was not what was written.
i ne JPA was written with the idea in mind that unless there were
substantial changes, the agreement would be,applicable if a muni-
cipally owned system were opted tor. He felt if they opted for
the system and the JPA agreed, Palo Alto would be precluded from
rewriting it.
Mr. Bennetti said the Franchise Review Board would not come into
existence until a franchise had been awarded. The other jurisdic-
tions would award a franchise to Palo Alto, and provisions in the
franchise would supervene inconsistent provisions in the JPA. If
a franchise were granted to a private party, that model would work
as outlined, or there would be a municipal system in which the
other entities opted out within 90 days because cf the substantial
changes.
Councilmember Klein felt the wording was misleading, because it
said the document would be applicable unless there were substan-
tial changes created by Palo Alto municipal ownership. It spoke
about it not being revised, not about it being revised. lie under-
stood from Mr. Bennetti's remarks that a municipal option would
cause substantial change.
Mr. Bennetti said the other jurisdictions would have an opportun-
ity to determine what was "substantial."
Councilmember Klein asked why the wording did not state that the
City was another franchisee. It had been frequently mentioned
that, unless there was substantial change, the' JPA would stand and
people could not opt out.
Mr tennetti agreed in the case of a franchise.
Councilmember Klein said if the City opted for municipal owner=
ship, a franchise still had'to be granted to them. Therefore, the
JPA, in a -municipal ownership option, was invalid.
Mr, Bennetti said `it was valid if the City arrived at mutually
agreeable franchise -agreement with the other jurisdictions.
Councilmember Klein said it was not true that the JPA would stand
unless there was a substantial change.
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Mr. Sinel explained that if the City's participation was through
financial ownership arrangements and the joint venture was with a
private cable company, it was unlikely there would be substantial
,chanye. The purpose of the Review Board still existed as other
,jurisdictions, it they were seriously aggrieved by an action
affecting their jurisdiction, they would have a right to a hear-
iny. It Palo Alto. owned the- systel it would probably not be
operated like a private venture or -a Joint Venture system would be
operated. He agreed that each jurisdiction should have a right to
say Whether they wanted to jo5':i a municipally -operated system.
Those that wanted to join would have to discuss the terms with
Palo Alto concerning the rights to use their streets.- That would
lay down parameters which would probably- supersede the Review
board, because the jurisdiction would want to make sure that Palo
Alto was the owner and operator and they had a fair system.
Councilmember Klein said he felt more comfortable if a paragraph
were inserted saying if the City opted for municipal ownership,
the JPA would have to be renegotiated. His co€,cerh was about the
Review board --if Palo Alto put up a substantial part of the money,
he did not want other cities saying how that money was to be
spent.
City Attorney Diane Lee said staff could do that.
Mayor Bechtel said it seemed he might want to expand that provi-
sion to apply to forms of joint ownership as well.
Councilmember Klein said that was correct.
Mayor Bechtel asked about the process of the JPA. If a paragraph
or a few sentences were added and approved, would it be returned
in a second reading.
Ms. Lee said there would be no second reading. If specific lan-
guage could be agreed, it could be said to be approved. They
should try to read it into the record that evening if there were
only minor changes. She recommended no major changes be made and
felt Councilmember Klein's wishes could be accommodated. It
should yo back to the jurisdiction that approved it for review.
Mayor Bechtel addressed Mr. Sinel and said the staff report advo-
cated for a JPA because there would be "certain economies of
scale. That would be clear in dense housing, but some communi-
ties were very spread out, and she wondered if true economies of
soale were involved. As the communities ...were very different, a
community opting out would affect the package for the franchisee.
Mr. Sinel said economies of scale related to the number of house-
holds the cable operator had the capacity to serve. A very
sophisticated system was being asked for requiring substantial
capital investment, and although housing was not ,dense, 48,000
households were more attractive to firms. outside the area than
24,UUU. .He anticipated the JPA would be in place before the RFP
was formally issued, as a company could not be asked to provide
six separate responses.- It was assumed that jurisdictions signing'
the JPA would remain in it, unless a municipal system were chosen,
then changes would have to be made.
Mayor Bechtel asked if he expected the JPA to be signed within the
next few weeks.
Mr. Sinel said tat was his understanding, the latest change
would not bother other cities. From various meetings with the
groups, all appeared willing to join.
CounCi lmember Fletcher referred to the last discussion and said
when a governing board of non -elected or non -staff members was
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mentioned , there was no reference to that in the documents. She
asked if it had been dismissed or was it still a possibility and
how it would fit into the hierarchy of decision -making.
Mr. Sinel said it was not inconsistent: with the idea of a commun-
ity wide board. If the City Council issued a franchise, a cable
board could be set up. If a municipal system were chosen; the
Council could appoint an agency to be the cable board.
Councilmember Fletcher said the reason the community board was
desired was because officials would not be involved in any pro-
gramming issues. She saw that as a broader issue than community
broadcasts.
Mr. Sinel agreed. If a franchise were issued, the franchisee would
be responsible for the programming and operation of the system. A
community board would not directly influence programming. A muni-
cipal system could include the- model Councilmember Fletcher
described.
Councilmember Fletcher said that neither the joint venture nor ,the
Franchise Review Board would deal with programming issues.
Councilmember Cobb referred to Mr. Sinel saying The did not anti
cipate sending the RFP out until the JPA had been signed_" was
there a possibility of it being sent out before.
Mr, Sinel Said only it one jurisdiction had committed to sign soon
and a short delay for technical rQasons occurred. Evaluation was
to oe in November and a decision made in December, and applicants
must have'a certain amount of time.
Counciimember Cobb understood the JPA neither precluded nor in-
cluded provisions for setting up a citizens' cable board. If Palo
Alto wanted that, it might mean renegotiation. He was concerned
that omission of items would hold things up.
Mr. Sinel said the eroyramming issue was a factor only in substan-
tial municipal ownership. Municipal ownership involved important
decisions; operation, program, governmental. access, etc., reyuir-
iny.public hearings. With Councilmember Klein''; suggested change
for the JPA, a municipal option would mean renegotiation and an
acceptable arrangement could be worker -out.
Mayor Bechtel declared the public meeting open.
Su Uhland, llY Lowell, Palo Alto, a member of the Chief Executive
Body of the Associated Students of Stanford University (ASSU),
said 9U percent of the student body resided in the proposed cable
service area. That was a larger number than Atherton and had more
adults than East Palo Alto. The ASSU could help ascertain the
community's needs and interests. It was concerned about rate
structure, programming, and community access. A formal mechanism
including the ASSU, should be set up to advise an __pol i,cy issues.
The Joint Cable -Working Group should have a student'as a nonvoting
members Representing 2,500 students'of the area, she wished- to
see- their needs 'fulfilled. The ASSU would work with officials
concerning internal policy at Stanford. A resnl utj on from the
Senate authorized Senator McGrath and her to advise and assist the:
Council. ,The role of student institutions, (newspaper, radio,
theatrical group) in cable TV and a student survey was being made.
questions should be addressed to Senator McGrath or herself.
John Kelley, 371 West Portola, Los Altos, a director of the Cable
Communications 'Cooperative of Palo Alto, said in general he
approved the JPA, but wanted .a change made in Exhibit -VI, page 3,
bottom of the page, "Marketing,.. (1) independent -'market surveys;
and/or (L) documented experience in demographically comparable
environments." -'He asked that the word "Independent" be changed to
"Ubject-tve.," The- co-op was, committed to .participation by
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consumers, and -wee attempting to formulate it5 own proposal. It
was making a marketing survey, and he wanted it to be acceptable.
As potential consumers, he could voice the requirements of the
community. It was the --objectivity, accuracy and validity of
results pf a marketing survey that counted, not who prepared them-.
He understood that Arnold & Porter had no serious disagreement.
Mr. Sinel said he had no objection to that alteration - if the Coun-
cil did 'not.
Uri Geva, 450 Fernando Avenue, Palo Alto, spoke for the Free Mar-
ket Alternative for Cable TV. A booklet had been sent to Council -
members. The Free Market enabled each customer to select a ven-
dor. He asked that the option be kept open and spoke against a
monopoly, which was rigid. Monopolies were traditional, but a
free market option should be considered for the long-term service.
He urged initiation of a professional study of a free market
study, and ,addition of a clause in the JPA allowing for same.
Co-encilmember Fletcher was intrigued by the proposal and asked how
could quality programming be preserved when profitmaking was -the
only criterion.
Mr_ €eva 'eei1 quality was -not -limited not -limited to programming. Local sta-
tions ��.i. r. �+r vyi ua�iiiii ny• �va.0 �t.u-
tions provided the product. The cable TV brought the product to
the name and the cnoice would be open.
Councilwember Fletcher asked about community broadcasting fund-
ing.
Mr. tieva said there was much flexibility. He suggested community
services to be done .by local groups. The cable operators were
required to offer those as part of their services. Public main-
tenance of community services could be awarded as a separate
contract.
Stanley Smith, 610 Wildwood Lane, supported the RFP, two-way data
communication and a joint city cable system. He felt legislation
in Washington would restrict citizens' influence on private fran.:,
chising in the future and was concerned about a -municipal system,
involving City speculation with tax money. That would be covered
by a joint venture. He underwrote exploration of a mid -Peninsula
regional system, both economically and as a public service. He
asked for the Council's patience and understanding with other
cities. He compared Cable TV negotiations with BART. Patience 20
years ago could have brought a public transport system here. e He
expressed concern over the negative public image of City staff on
the issue.
George Beers, Uean of Telecommunications in Foothill -De Anza
Community College District serving local • communities, said they
currently broadcast 95 hours per week of credit college courses
over cable systems in Cupertino and Sunnyvale. With Palo Alto
=City staff and PAEISp), they had put .together.. educational proposals.
He wanted some words added to the JPA, .because Foothill was out-
side Palo Alto City bounds. Exhibit V, Item A, page 14, "Minimum
Requirements," should specify, "including Foothill College Main
Campus." That would be analogous to San Jose, which would -inter-
connect with De Anz.a. Sunnyvale- had interconnected with De Anza
and Cupertino, and Mountain View was connecting With Foothill.
Councilmember levy asked if connection with Mountain View would
automatically mean connection with Foothill.
Mr. Beers said yes. It depended -,upon interconnecting with an
institutional network that would come to Foothill'. He wanted to=
make sure they provided signals on both subscriber and institu
tio'nal networks.
3 5 4 1
6/30/83
Councilmember Levy asked for cone:lents from staff or the consul-
tant
Mr. Sinel said. currently minimum requirements required the fran-
chisee serving Palo Alto to interconnect with all systems in the
region. He assumed the interconnection would go both ways. Since
subscriber and institutional cable were connected at the head
ends, this should suffice. • Palo Alto did not have the jurisdic-
tion through the JPA to authorize potential franchisees to lay
cable to Foothill College.
Councilmember Levy asked. if there was a problem in interconnecting
with, for instance, Mountain View.
Mr. Sinel said they could refuse to participate. - If the Mountain
View -system provided for interconnection, it could be settled by
the City Councils. Technical problems could be worked out by the
companies.
Lyn Simpson, New Marketing Manager ifor Viacom Cablevision,_ spoke
about market area size and home density. There was a significant
difference in the jurisdictions. Also construction type was cru-
cial; aerial construction cost about $20,000/mile.for dual cable.
Underground construction cost $110,000/mile. Fixed costs would be
close to $l million and total costs would be approximately $12 to
15 t4i i imill, Lo ii r. soredd over Lilo number of homes. She explained
that dense areas subsidized costs of low density homes. Her com-
pany had many good ideas, but a- clear, well defined -service area
and time table were necessary.
Councilmember Cobb referred to Ms. Simpson's letter of June 1. If
the JPA was not signed by everyone, would that jeoparidize their
response.
Ms. Simpson said they could assume any Council not signing the
JPA before the RFP was issued would not be committed.
Councilmember Cobb asked if a response could be structured modu-
larly to allow for that.
Ms. Simpson said that in all consortiums she knew of, all' partners
had been involved at all stages. Her company was concerned be-
cause the other communities had hardly been involved. She feat a
modular proposal possible, but the large number of variables made
that very complex and very taxing.
Walter Hewlett, 945 Addison Avenue, suggested --one cable bids be
acceptable. Pasadena had a one cable system`. 70 channels were now
possible on one cable. If the City became a partner, the economic
advantage of one cable should be considered. Since April, possi-
ble channels on one cable had increased from 54 to 70; market con-
ditions were changing, and not so many channels were needed; sub-
stantial improveii,ents in hardware decreased the number of channels
required. He .d' d not argue against dual cable but wanted one-.
channel bids to be considered.
Michael-- Flicker, 235 Walter Hays Orive, am employee of Viacom
Cablevision, said his company was definitely interested in serving
all the jurisdictions. He suggested the JPA be signed -only by
Palo Alto, Santa Clara and Stanford. Palo- Alto might otherwise
subsidize outer- cities. Cable companies knew other cities would
join after Palo . kl to. It would be easier to negotiate with a
smaller number. A cable company could enter into 'an agreement
ii lth Palo Alto and .Stanford as a private franchise -or- a joint
agreement,. and other cities --could later be added, when charges
would reflect their actual costs, they. would receive the benefit
of scale from the community regional System and the company would-
make sure they -understood the process. As things stood, other
cities might later raise questions already settled -by Palo Alto.
Mayor Bechtel closed the public hearing. She asked the consultant
what the pro's and con's were to --bidders for -a franchise for Palo
Alto and Stanford alone.
Mrs, Sinel said that was difficult.' Viacom Cablevision of Mountain
View was ideally situated to take communities one at a time, `but
it was unknown whether an outsider would then be willing to bid.
The present JPA, was difficult, but not impossible. It would be a
judgment call, and he asked for views of staff.
Mayor Bechtel asked about; educating officials o;` other communities
on the various issues and whether or not other staffs had the
benefit of counsel.
Mr. Laner said their involvement varied. The original recommenda-
tion of a year ago was to construct a system with interconnected
capaOilities. Counsel instructed us to contact other jurisdic-
tions about a joint program. We received letters of intent from
them. The JPA was fashioned with the other jurisdictions, and the
JPA was before other Councils. He understood all were comfortable
with it. Atherton had joined and he expected others to join
soon.
Mayor Bechtel asked if Stanford's Board ,.rnuuld be the official hndy
to approve the JPA and subsequently, if a franchise were granted,
would they make an appointment to the irancflse Review Board.
Mr. Sinei i u hf irwed the 5oard v(. Supervisors was the authority.
He had dealt with Ct�.‘ferrri rep'esentatiYess, however it WAY;iii be
the County concerned in the JPA.
Mayor Bechtel asked if that would present a problem.
Mr. Sinel said he saw any problem only as a matter of taming.
Mayor Bechtel recalled many difficult, lengthy meetings about
unincorporated areas with the Board of Supervisors on the Gill
Cable contract.
Mr. Sinel said they dealt only with a specific portion of the -
County and had the support of property owners, tenants and occu-
pants.
Mayor Bechtel asked for consultantFs views on two -cable versus one
cable systems.
Mr. Sinel said it was not clea'^ that capital costs varied much
Single cable was easier to install. The area wanted a very
sophisticated, interactive facility to be utilized also for com-
puters and the business community. it had been decided not to ask.
for a shadow instit4tional cable, as two cable would provide -ade-
quate capacity. Without data needs, a single cable .could be bid
for. At that stage, he felt a single cable system would create
difficulties.
RECESS FROM 9:30 P.M. TO 9:30 P.M.
Councilmember levy referred to economies_ of scale and reaching out
to -areas of lower density.
Mr. Sinel said the question was did the area lose economic viabil-
ity because of the system.-. Palo. Alto had a persons per plan mile
of 251; Menlo Park 347; East Palo.Alto 449; Ladera 130-; Menlo Oaks
203; University Heights 192. Stanford was difficult to compute.
Atherton was being computed. Therefore, Palo Alto was ma -good
position regarding density. A 48,000 household market seeking a
sophisticated cable. system was more attractive -.than 24,000. Af
the additional 24,000 households involved..underground construction
and demographic problems to cable ._companies, there would be no
1
1
advantage. economies .ot scale advantages related mostly to the
head end facility, and a very sophisticated one was required.
Other costs per household remained the same. Cable operators
liked 100,000 households. He hoped the quality of the area would
De attractive and obtain a service that the number of households
alone would not justify.
Councilmember Levy said he was reassured. He asked if the system
was a highly reliable system, as opposed to a system taking tech-
-noloylcal risks. He was concerned about the frequent use of the
cliche, "state-of-the-art."
Mr. Sinel interpreted "state-of-the-art" as that which was cur-
rently_in practice and proven in relatively sophisticated systems,
economically viable and technically sound, not prototypes. P1_
though Palo Alto would have innovative systems proposed, the risks
involved migh`. be too high.
Councilmember Levy asked if they would be kept advised in the
analysis when risks arose.
Mr. Sinel agreed they would.
Councilmember Levy repeated the Council .would probably opt for a
municipally -owned system. He voiced concern about a City -owned
S fStP_m run by r3 nrivatp nnerAtllr An4 thc. fron fnr i in tha DLG-
Mr. Sinel said it would be difficult to determine. They would try
to yet as many replies as possible. The evaluation report would
aim to provide a framework- with few variahles, financial models
and comparative tables. The Council could then decide between
municipal parti.:ipation and a private operator. Palo Alto could
move freely within the framework to determine programming and
financing, internal or external.
Councilmember Levy asked if after responses to the RFP had been
received and the municipal alternative was still under considera-
tion, would responses hold for a long enough period.
Mr. Sinel said the evaluation report should provide sufficient
comparative data for a responsible decision to be made. Companies
should not be put on hold while a municipal system was created.
One alternative should be decided upon.
Councilmember Levy asked if the consultant saw an agreement being
reached by the end of the year.
Mr. Sinel said the tools for reaching a decision should be there.
Mr. Laver said that was a critical point for the Council to bear
in mi nd, When the analysis was received in November, the consul-
tants should have identified the issues sufficiently so the Coun-
cil could decide on either tFie municipal or franchise route. The
municipal route would require some parameters laid down by -_,the
Council. `\
Vice Mayor -Witherspoon responded to the Stanford student who
wanted to know how they could be involved in policy making. She
asked Mr. Sinel to. explain the difference between the current
staff -run Joint Cable Working Group. and an eventual policy board
run by citizens.
Mr, Sinel said thet Joint Cable Working Group dealt with current
mechanical aspects of putting the system together; later the
Council could form a community wide cable policy board.
Councilmember Cobb felt the mechanism for creating a community
board should be spelled out in the JPA. Also, wthe JPA should be
sufficiently specific on how local programming would be made.
3 5 4 4
_6/30/83
Mr. Sine! said Section VI of the JPA contemplated establishment
of one or more organizations to deal with public access. Section
V I .1UZ showed some of the portfolios the orya'ii zat.i on would have.
Staff understood thet the Board did not replace community groups
to deal with programming. The allocation of financial, physical
and cable capacity resources was more complex, the latter depended
on the design of the system. Facilities would be shared, and this
could create problems. There would be difficulties, but he
assumed cities would cooperate.
Councilmember Cobb said some irreconcilable differences might
arise.
Mr. Sinel suggested the Council hold public hearings in the fall
to deal with'the access issue. With that input, consultants could
give public supported recommendations. The problem complicated by
having other jurisdictions should be solvable.
Councilmember Cobb was concerned by having legal matters built on
hope. He asked if -a franchise were opted for and S66 passed,
could Palo Alto extract language from a potential franchisee to
protect from retroactive thrusts of the 565.
Mr. Sinel said we would have a stronger negotiating hand if it
were law. A franchise agreement could ask a company to waive any
things t:icj wi:ry s ;ia.i,ticu 1. i7. i°11ly1. Ui 6IIC Ul l I
could be waived without affecting public policy. The question
would not arise_ until negotiation, but the cable operator would be
cable i L operator U 4 V 7 would N 7 4 if
aware of his rights.
Councilmember Cobo asked why commitments were not asked tor now
before legislation had been passed.
Mr. Sinel said he thought they had asked for everything possible.
.ihe 566 addressed "grandfathering," i.e., an agreement signed
before the bill became law, and also access facilities in conjunc-
tion with issuance of the RFP. The RFP asked for services contem-
plated in the bill. Any cable operator who tried to withdraw from
his offer would not be a suitable candidate.
Councilmember Cobb referred to money for the general revenue from
advertising, etc. and asked was the allocation of potential profit
to all participating cities made clear enough in the JPA.
Mr. Sinel said the JPA was clear for a private system only. Each
individual jurisdiction had a right to self -generated revenue. No
cable operator would allow use of municipal channels to generate
income. The City could lease a_ channel, but the S66 prohibited
requiring the cable operator to offer leased services. Palo Alto
ownership allowed it to generae whatever income it could. He
referred to the request for a public marketplace, and said the
U.S. Senate was going in the opposite direction. The JPA would
not require revenue generated iby one -`city to be shared. That
would be made crystal clear.
Councilmember Cobb was bothered by the lack of a specific con-
struction schedule. 'He understood why flexibility was necessary
for performance standards, but not for construction. He wanted to
see a time date set.
Mr. Sinel.said this could be donee he would have to kH ow how many
jurisdictions- signed. the JPA and Mould -consult -with the engineers
as it= related to overhead and unde,rground construction. He would
rserve judgment, but would insert a tight time date.
Councilmember Fletcher referred to page 24 of the RFP, *Construc-
tion of the system must move forward simultaneously in all juris-
dictions within the service area...," and asked if that was real-
-- istic. She wondered how it could be done.
3 5 4 5,
6/30/83
Mr. Sinel said it was curisisLent with sound engineering design and
practice. It was possible to start construction in many areas at
once, and he assumed that work in all areas would start at almost
the same time.'
Councilmember Fletcher asked for comments concerning the request
from the public that no monopoly be formed, but that a free market
exist.
Mr. Sinel understood the comments to mean that the cable itself
should function as a common carrier. The. private cable industry
was not enthusiastic, and did not want to lease channels. If Palo
Alto made it a requirement, he did not expect any bids from cable
operators,- only from companies wishing to enter a common carrier
business. If the country had been wired, that would be an
option.
Councilmember Fletcher referred to decision making deadlines.
When the proposals and recommendations came back, she felt they
would not have full information on the- municipal option because
no- RFP was going out for it. That would mean restarting before
the Council could make a decision.
Mr. Sinel said the information given meant- the Council could
decide un the route to hp - taken. Either route could fail. With a
real directive; ri dual rr i. I r{ be creeated T .
_-. . _ ,.. ..,���;.. .� way utk.iueu earlier
that a municipal deal and a private RFP process could not be run
simultaneously as the municipal option would make the private `RFP
option make -h Mfr r Ya i.0 RFP
less attractive. The fine tuning was not the deciding factor.
Councilmember Fletcher said previously the data had been incom-
plete. They feared they might have to rely on the General Fund,
She did not see how they would have more information in November.
Mr. Sinel said municipal systems could be financed without issuing
bonds or endangering the General Funds. The Council -could stipu-
late the general treasury and the City were not to be at risk.
That would be explored before the evaluation was prepared. If the
City chose a joint venture option or municipal option, the agree-
ment would be very short. There would be enough information for
the Council to feel comfortable with its decision.
Councilmember Klein suggested the wording of a motion. He compli-
mented the consultant._ and staff. The document in front_ of the
Council was excellent and well suited to the difficult task. He
welcomed the fact that many areas were open ended and not tied
down to specific milestones. Almost all of the Council tad used
the word "bid" in talking about what the private applicants might
submit, and that was hardly half correct. It was not the same as
a sealed bid, where the wording could be precise. However, the
Council was asked to select the most suitable applicant for the
franchise bid and then negotiate an agreement. Numerous things
that could not be covered in an RFP fell into that category. ,He
felt the most qualified applicant should first be found, so it
would hot be useful to commit the applicant to beginning construc-
tion on a- certain date.-- There would be various trade-offs, which
may or may not succeed. Mountain View required quite some time to
negotiate, -and their system was less complicated. Another reason
was --it allowed for creativity on -the part of the applicants. They
might offer accommodations not-- so far considered, , and the very
proces$.of creatiVity would allow judgment.' He asked for -approval
of the RFP and the JPA. He wished to include in his motion that
the wording of the language be changed,. suggested by the -represen-
tative of the Consumer Cooperative that the marketing study -be
"Objective" and strike the 'word "independent," and include s'c me
revised language for the JPA in '-response to the items he raised
earlier, as suggested by the consultant and - the Attorney's
office, in Section 1.2.02, to add at. the end, "provided that --if
3 5 4 5
6/30/83
the City 'f Palo Ai'u decides to pursue an option to wholly own,
or to participate to some extent in the ownership of, the cable
television system, the City of Palo Alto may terminate this agree-
ment, at its option, by giving the other parties hereto written
notice of termination within one hundred (100) days of such deci-
sion." Fdr consis ncy, the staff suggested- that in Section .7.1,
the ':ast Section of the JPA, that the language he changed to
include, at the start of the Section, the phrase, "Seubject to` the
provisions of Section 1.2.02, this Agreement.,.," thus providing a
cross-reference.
Councilmember Eyer!y referred to the staff recommendation to issue
the RFP and hay.�- the JPA executed by the participating jurisdic-
tions. He assumed --this would be part of the motion.
Councilmember Klein thanked him for bringing up the matter. He
felt, this language should be used, hut it should also include a
time limit, to be determined by staff, when, if not all partici-
pants had been heard from, the REP should be issued.
Councilmember Eyerly asked for staff comments on what they thought
was a suitable deadline.
Mr. Zaner said he was not sure, but they would target to stay on
schedule, with the final date to be determined. They would work
backwards to en'siire- the RFP 1.rac iccunr1 nn +;n,n 1-s,,. .___
important date.
Mayor Bechtel said the danger lied in not providing adequate time
for both the respondents to the REP and to the rnnsnitant to make
the evaluations. She was opposed to. delaying the issuance of the
REP, and stressed they should hold to the time line and the gaps
between those key points.
Mr. Sinel suggested that if the RFP had not been issued nor the
JPA signed after the City Council met on July 25, the issue be
brought back to the Council for its decision on how to handle it.
Mayor Bechtel said it was important for the Stanford public to
work with their locally elected officials to speed-tij matters.
Councilmember Levy said he thought the RFP by and large to be
good. He was more reassured after the discussions. He said Coun-
ci imember Klein was appreciative of the open endedness factor, but
as a pessimist he saw the RFP as some confusion, an opportunity
for inconsistent responses and was concerned that non-comparab;e
responses would be received, resulting in a- decision based on less
important criteria. The consultant should make sure that Council -
members, who were not very informed on cable television, were
aware of what tree. most important criteria were., to compare bids
and focus on key elements. The RFP represented a system that was
advanced, called for a great deal of two-way communication, and
was worthy of the electronic and computer sophistication of the
area.
Mr. Laner asked Councilmemoer Klein if he, would consider including
in the motion some measure of discretion for the City :Attorney to
make -non -substantive changes.
Councilmember Klein said that was his intent. He would include; in
the motion that the City Attorney, on her own, could approve
trivial or minor changes in the JPA without referring to City
Council.
Mayor Bechtel verified if the Santa Cl ara' County Board of Super-
visors did not take up the JPA on the July 19 for discussion on
the Palo Alto agenda of July 25, that would be in order.
3 5 4 7
6/30/83
Mrs Si ne l said it would only appear on the agenda if It had not
been signer by all parties authorizing all necessary sieps. The
longer it took to issue the RFP, the tougher the maintenance of
the schedule.
Mayor Bechtel said if the board of. Supervisors approved the JPA on
July 19 and all other jurisdictions signed it, it could be issued
on July c[1 which would start the notification process.
Vice Mayor Witherspoon asked Councilmember Klein to explain the
new wording because_ as she understood it, if Palo Alto opted for
any kind of municipal ownership or participation, it could leave
the JPA. She felt the wording sounded automatic, as though
renegotiation 'would be necessary-.
Councilmember Klein said he wanted to make sure the language gave
Palo Alto the opportunity to renegotiate. It was essential t_hat
if Pall Alto opted for municipal ownership, the JPA could be
renegotiated. Previously, their right to do so was not clear.
Vice MajOr Witherspoon asked if he felt it was clear they had the
right to opt out. She did not want to delay matters. She agreed
that parts of the JPA probably would be renegotiated.
Councilmember Klein said it was only an option from their stand -
11tH nt ttlAt nanA nnf _
_ __ _ _ .. .. .. . -v v�. •- na:1 M I J6V.
NOTION: Councilmeber moved, .t a
Klein.. a�Lwlu.�u by Cobb, to
approve: 1) the Request for Proposal (RFP); 2) the Joint Powers
Agreement (JPA) with the following amendments, a) revise JPA Sec-
tion 1.2.02 to add 'provide that if the City of Palo. Alto decides
to pursue an option to wholly own or to participate to some extent
in the ownership of the cable television system, the City of Palo
Alto may terminate t.is agreement, at its option, by giving the
other parties hereto written notice of termination within one
hundred (100) days of such .decision, b) Ex. VI, page 3, C.
Marketin , change "independenit market surveys° to "objective
mar surveys', and c) Ex. Y, page 14, Item a, include roothill^
College main campus; and 3) to allow City Attorney discretion to
approve trivial and minor changes in the JPA
MOTION PASSED Unanipously, Councilimembers Fazzino and Renzel
absent.
Mayor Bechtel said a previous speaker discussed some criticism
made'0 the staff and she assured him, the press, the public and
the staff that she did not concur. She felt the staff had do.
excellent work and complimented them on their report. She thankeu
Mr. S>inel and apologized for the d iff;culty in setting up the
meeting.
Counci lmember Fletcher added her compliments..
Councilmember Levy also complimented staff on their efforts in the
furtherance of cable TV. They had a professional staff and he_
shared in the comments made by Mayor Bechtel and Councilmember
Fletcher..
I L M I/3 CANCELLATION OF JULY b, 1983 CITY COUNCIL. MEETING
MOTION: Councilmember Eyerly moved, seconded by` Mayer Bechtel',
to cancel the July 5 City Coun it 3eeting;
3 5 4. 8
5/30/83
AUJUURt4MLi'a1
Council adjourned at 10:45 p.m.
ATTEST:
APPROVED:
3 5 4 9
6/30/83