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Home My WebLink About2004-05-18 City CouncilCity of Palo Alto City Manl [j ort ’04- ’05 TO:HONORABLE CITY COUNCIL ATTENTION: FINANCE COMMITTEE FROM:CITY MANAGER DEPARTMENT: UTILITIES DATE:MAY 18 2004 CMR:221:04 SUBJECT:RESOLUTION ADOPTING CHANGES TO THE FEES FOR DARK FIBER RECOMMENDATION Staff recommends that the City Council adopt the attached Resolution rbvising the rate structure for dark fiber services. BACKGROUND The City of Palo Alto established the dark fiber-optic system in 1996 (CMR:361:96) "as an extension of the City’s long-standing policy of providing utilities infrastructure for the citizens and businesses of Palo Alto," and "for accelerating the pace at which high- quality, low-cost, advanced telecommunications services are delivered t~ghout Palo Alto while limiting any negative impacts on Palo Alto’s physical environment." The Council originally approved the fee structure in the City’s first dark fiber license agreement in April 1997. Since March 15, 2000 (CMR:164:00), the Council has approved revisions and updates to the dark fiber rates as needed on roughly an annual basis. Most recently, on April 14, 2003 Council (CMR:ll6:03) adopted a new set of changes to simplify and clarify the rate schedule along with adding language to establish early termination fees. CMR:221:04 Page 1 of 5 DISCUSSION In an effort to pattern dark fiber rate schedule on the model of the rate schedules of the other services offered by the City and to make dark fiber pricing more customer friendly and simpler to communicate; staff proposes a split of EDF-1 rate schedule into two components: 1. EDF-1 for re-occurring fees (Licensing Fees), and 2. EDF-2 for one-time fees (Service Connection Fees). Staff has identified several language areas where modification would improve clarity to the rates. The proposed changes are as follows: LANGUAGE RELATED TO NEW EDF-1 (LICENSING FEES) Section: EDF-I Title EDF-I (A): Description of Change: ¯"Dark Fiber Licensing Fees" ¯Removed redundant content from old EDF-I EDF-I (C-I) EDF-I (C-2): EDF-I (C-3): EDF-1 (D-t): EDF-1 (D-2): Old EDF-I (Sections C-3, C-8, and D-3) revised and incorporated into C-I, Old EDF-I (Section C-4) revised and moved to C-2, Old EDF-I (Section C-7). Language added describing applicability of Rule 11 to dark fiber customers Old EDF-I (Section D-4) revised, Comments/Explanations: New name for the proposed rate schedule Simplify the rate schedule, Removed minimum price language since such language is applicable to Public Benefit only, simplify discounts descriptions and define terms more clearly. Simplify the rate schedule. No revisions. Clarify customer responsibilities related to Rule 1 I. Simplify the rate schedule. The following language has been dropped from the new rates: Old EDF-I (Section C-3) "License Fee includes the cost of splicing the Backbone at all intermediate splice points." These costs are partially collected with construction fees,, ~Old EDF-I (Section C-8): Charges for administrative and unpaid balances are covered in Utilities Rule 11 ~Old EDF-I (Section D-I): License fees are now collected monthly through the Utility billing system. ~Old EDF-I (Section D-2): Conform language with other Utilities rate schedules CMR:221:04 Page 2 of 5 LANGUAGE RELATED TO NEW EDF-2 (CONNECTION FEES): Section:Description of Change:Comments/Explanations: New name for the proposed rate EDF-2 Title ¯"Dark Fiber Service Connection Fees"schedule ¯New language defining applicability of service connections and disconnections to dark fiber Conform to other service connection rate EDF-2 (A):network schedules. ¯New language defining territory for dark fiber Conform to other service connection rate EDF-2 (13):customers schedules. EDF-;~ (C-¯Old EDF-1 (Section C-1) revised to conform to 1 ):Electric Rate Schedule E-15.Simplify the rate schedule. EDF-2 (C- ~): EDF-2 (D- I): EDF-2 (D- 2): EDF-2 (D- 3): Old EDF-I (Sections C-2, C-5 and C-6) revised and incorporated into C-2. Language added describing conditions for connections Language added describing conditions for connections Old EDF-I (Section D-4) revised. Simplify the rate schedule, and tie the disconnect fees to City’s labor rates (Rate Schedule C-I) to avoid future fee adjustments: Conform to other service connection rate schedules. Conform to other service connection rate schedules. Simplify the rate schedule. The following language has been dropped from the new rates: > Old EDF-I (Section C-6): Elimination of language to simplify the rate schedule and conform to other service connection fees. Finally, in accordance with the Council approved dark fiber license agreement (CMR 177:97), staff proposes to adjust rates in accordance with the current local consumer price index (CPI) to be effective July 1, 2004. The following sections are changed as summarized to incorporate the current CPI index adjustments: CMR:221:04 Page 3 of 5 Rate Description Current Rates EDF-1 (Section C-1):All dark fiber backbone license fees Fiber Price quantity discount Buffer tube discount Route length discount Ring topology discount Length of term discount Public benefit price Min Total Annual Dark Fiber License Fee $2,905/FMY $0 to $581/FMY $0 to $581/FMY $0 to $755/FMY $0 to $2321FMY $0 to$4541FMY $5221FMY $4,378/year EDF-I (Section C-2): All dark fiber lateral connection fees Drop Cable Management Fees $0.I 0-$0.55 Custom Cable Management Fees $2.81 Fees for additional fiber $0.55 EDF-2 (Section C-I): All advance engineering fees Commercial/Industrial AER study $500 Proposed Rates $3,166/FMY $0 to $633/FMY $0 to $633/FMY $0 to $823/FMY $0 to $2531FMY $0 to $4951FMY $6331FMY $5,0651year $0.1 I-$0.60 $3.06 $0.60 $633 Additional lateral fee for AER study $500 $633 Percent ChangeI 9% 9% 9% 9% 9% 9% 9% 16%2 9% 9% 9% 27%3 27%3 ~ Percent changes are 3-year cumulative CPI adjustment for 9%, 7-year cumulative adjustment for fees that has never been adjusted for CPI totaling to 27%, and corrective CPI adjustment to the minimum contract fee totaling to 16% change. 2 In the past, dark fiber contract minimum has not been escalated at the same rate as annual fees. With this proposed rate of adjustment, they are brought up to the same index as of annual fees. 3 Advance Engineering Fee has never been adjusted for CPI since its implementation. This proposed adjustment allows tile City to recoup some of the total cost of advance engineering studies. A further rate study will be done to readjust these rates in the near future. Source:Bureau of Labor Statistics - Consumer Price Index (All Urban Consumers for Bay Area) Series ID: CUURA422SA0 RESOURCE IMPACT The proposed schedule changes impact revenues only by the CPI adjustment, and will increase annual revenue by approximately $100,000. In fiscal year 1996-1997, the Electric Fund provided approximately $2 million for construction of the fiber backbone. Since then, an additional $2.3 million was spent for upgrades and expansions to the system, a total of nearly $4.3 million. The dark fiber unit. has had positive cash flow in the past two fiscal years with a net income of $647,913 for fiscal year 2002-2003 ($1,418,801 in total revenue and $770,888 in total expenses). CMR:221:04 Page 4 of 5 POLICY IMPLICATIONS These recommendations do not represent any change to existing City policies, in fact they represent an effort to better streamline with existing utility rules, and are consistent with the Council approved Utilities Strategic Plan to deliver products and services for competitive markets in a non-discriminatory manner. ENVIRONMENTAL REVIEW Adoption of the Resolution to establish Rate Schedules EDF-1 and EDF-2 does not constitute a project under the California Environmental Quality Act. ATTACHMENTS A:Resolution B:Rate Schedule EDF-1 C:Rate Schedule EDF-2 PREPARED BY: CAN Senior Resource Planner, Telecommunications DEPARTMENT HEAD: ¯ Director of Utilities CITY MANAGER APPROVAL: Assistant City Manager CMR:221:04 Page 5 of 5 ***NOT YET APPROVED*** RESOLUTION NO. RESOLUTION OF THE COUNCIL OF THE CITY OF PALO ALTO ADOPTING REVISED UTILITY RATE SCHEDULE EDF-I OF THE CITY OF PALO ALTO UTILITIES RATES AND CHANGES PERTAINING TO DARK FIBER LICENSING SERVICES The Council of the City of Palo Alto does RESOLVE as follows: SECTION i. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule EDF-I (Dark Fiber Licensing Services) is hereby amended to read in accordance with Utility Rate Schedule EDF-I (Dark Fiber Licensing Services) sheets EDF-I-I through EDF-I-2 and Utility Rate Schedule EDF-2 (Dark Fiber Service Connection Fees) sheet EDF-2-1, inclusive, attached hereto and incorporated herein. The following Utility Rate Schedules shall become effective May ii, 2004. SECTION 2. The Council finds that the revenue derived from the authorized adoption enumerated herein shall be used only for the purpose set forth in Article VII, Section 2, of the Charter of the City of Palo Alto. SECTION 3. The Council finds that the adoption of this resolution does not constitute a project under the California Environmental Quality Act, California Public Resources Code section 21080, subdivision (b) (8). INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: City Clerk APPROVED AS TO FORM: Mayor APPROVED: Senior Asst. City Attorney City Manager Director of Utilities 040406 cl 0072381 Director of Administrative Services DARK FIBER LICENSING SERVICES Ao Bo Co UTILITY RATE SCHEDULE EDF- 1 APPLICABILITY: This rate schedule applies to customers receiving Dark Fiber services from the City of Palo Alto Utilities (CPAU) pertaining to the City’s Dark Fiber network (Backbone). TERRITORY: Within the incorporated limits of the City of Palo Alto and land owned or leased by the City. FEES: 1.DARK FIBER BACKBONE LICENSE FEES: The current values or ranges for each of these price components are shown below: (1) Fiber Price ....................................................................................................................$3,166/FMY (2) Quantity discount .........................................................................................................$0 to $633/FMY (3) Buffer tube discount ....................................................................................................$0 to $633/FMY (4) Route length discount ..................................................................................................$0 to $823/FMY (5) Ring topology discount ................................................................................................$0 to $253/FMY (6) Length of term discount ...............................................................................................$0 to $495/FMY (7) Public benefit price ......................................................................................................$633iFMY Public facilities providing substantial public benefit to the community are eligible for the public benefit price. All other customers are subject to the fiber price and applicable discounts. (8) Minimum Total Annual Dark Fiber License Fee .........................................................$5,065.00/year Minimum total annual dark fiber license fee will be assessed against the first project of the license agreement. Description for Discounts: Quantity discount: based on an array of discounts for quantities of fiber licensed on a specific path. Buffer tube discount: discount for numbers of full buffer tubes licensed on a specific path. Route length discount: based on the route length licensed on a specific project. Ring topology discount: The ring topology discount for customers contracting for complete rings. Term di.scount: based on an array of discounts for contracts greater than one and less than ten years. DARK FIBER LATERAL CONNECTION FEES: If a lateral connection requested by the Licensee cannot be installed in existing conduit, or attached to existing poles from the first demarcation point to the second demarcation point, then the Licensee may request that the City install new conduit and cable at the Licensee’s sole expense. In either occasion, the Licensee shall pay an annum Drop/Custom Cable Management Fee. (1) Drop Cable Management Fees (per Foot, for the first 12-Fibers) ................................$0.11-$0.60 CITY OF PALO ALTO UTILITIES Issued by the City Council Supercedes Sheet No.EDF-I-1 dated 4-14-2003 CITY OF PALO ALTO UTILITIES Effective Sheet No.EDF-I-1 Do DARK FIBER LICENSING SERVICES UTILITY RATE SCHEDULE EDF-1 (2) Custom Cable Management Fees (per Foot, for the first 12-Fibers) ........................... (3) Fees for additional fiber (per Foot, each additional set of 12-Fibers) .......................... EARLY TERMINATION FEES: $3.06 $0.60 If the Licensee chooses to terminate for convenience the License Agreement or the term of any project under the License Agreement, then the Licensee shall pay the applicable termination payment as specified in this schedule or in the License Agreement, as provided below. Unless otherwise provided in the License Agreement, the Licensee shall pay a termination fee in one of the following amounts, whichever is less: Annual fee of the contract year that the Licensee chooses to terminates in full without term discounts, or Remaining fees of the project term as indicated in the License Agreement. SPECIAL NOTES: All recurring Dark Fiber License Fees must be paid to the City according to the specifics in Utilities Rule 11, except the provision for "Resale prohibition." For Dark Fiber services, licensed fiber can be subleased to a third parties, but the primary Leasee will be liable to comply with the Fiber Optic Lease Agreement, the Proposal for Dark Fiber Services Agreement and all the applicable Utilities Rates, Rules, and Regulations. The Leasee is also obligated to notify the City of such assignment of its leased fibers to a third party. All fees are subject to annual consumer price index (CPI) adjustments each year. CITY OF PALO ALTO UTILITIES Issued by the City Council Supercedes Sheet No.EDF-1-2 dated 4-14-2003 CITY OF PALO ALTO UTILITIES Effective Sheet No.EDF-1-2 Co DARK FIBER SERVICE CONNECTION FEES UTILITY RATE SCHEDULE EDF-2 APPLICABILITY: This schedule applies to all connections, expansions, and upgrades to the City’s Dark Fiber network (Backbone). TERRITORY: All territory within the incorporated limits of the City and land owned or leased by the City. FEES: 1.ADVANCE ENGINEERING FEES: Advance engineering (AER) fees must be paid to start the engineering process and are non-refundable. The engineering fees will be credited against the estimated job cost prior to the collection of construction fees. (1) Commercial/Industrial AER study (with one lateral) .....................................................$633.00 (2) Additional lateral fee for AER study ..............................................................................$633.00/lateral (3) Special conditions (requiring expert assessment) ...........................................................By Estimate ESTIMATED SERVICE CONNECTION AND DISCONNECTION FEES All estimated service connection and disconnection fees must be paid prior to the scheduling of any construction, connections, or disconnection to the City’s Dark Fiber network. (1) Service connection (Interconnection) fee .....................................................By Estimate (2) Service disconnection fees (with one lateral) ...............................................4 hours x labor rate (3) Additional lateral fee for disconnection ........................................................4 hours x labor rate/lateral (4) Reconfiguration Fees ..................................................................................... Labor rates are subject to change as stated in the Utility Rate Schedule C-1. NOTES: 1. By Estimate The Customer is responsible for the installation of all equipment and pathways from the facility to the designated point-of-service. For underground work, this includes conduits. The City cannot be held liable for delays in service connection or disconnection caused by conditions beyond its control. 3.All fees are subject to annual consumer price index (CPI) adjustments each year. CITY OF PALO ALTO UTILITIES Issued by the City Council CITY OF PALO ALTO UTILITIES Effective Original Sheet No.EDF-2-1