SR - RES-11003 - REAUTHORIZING OMC CHAPTER 13.81 RELATING TO CABLE TELEVISION FRANCHISE FEES1. SUBJECT
Resolution No, 11003 — A Resolution of the City Council of the City of Orange Reauthorizing
OMC Chapter 13.81 Relating to Cable Franchise Fees.
2. SUMMARY
Effective January 1, 2007, the Digital Infrastructure and Video Competition Act of 2006 (the
"Video Act "), authorized entities that desire to provide video services, such as cable television,
to obtain a state franchise. Prior to the Video Act, cable service providers had to obtain
franchises from each local agency in which they intended to provide service. In June 2007, the
City Council adopted Ordinance No. 14 -07 to ensure that state franchisees pay the same 5%
franchisee fee paid by current cable providers and a 1% public, educational, and governmental
( "PEG ") fee. Resolution No. 11003 reauthorizes OMC Chapter 13.81 relating to cable franchise
fees.
3. RECOMMENDATION
Approve Resolution No. 11003.
4. FISCAL IMPACT
The City receives approximately $1.3 million in franchise fees and $272,000 in PEG fees
annually. While franchise fees can be used for any general fund purposes, PEG fees can only be
used for PEG channel purposes.
5. STRATEGIC PLAN GOAL(S) _71
2d. Be a fiscally healthy community — Effectively manage and develop City assets.
6. GENERAL_ PLAN IMPLEMENTATION
Not Applicable
7. DISCUSSION
Under the Video Act, cities can continue to collect up to a 5% franchise fee, as well as a 1% fee
for PEG channels purposes. The fees are based on the video service provider's gross revenue
from customers within the local jurisdiction. The franchise fee, which is essentially the payment
by the video service provider for the use of the City's rights -of -way, can be used for any City
purpose. However, the PEG fee can only be used for capital costs (i.e., cameras to televise
council meetings) related to the provision of PEG channels. Currently, the City has three PEG
channels, local access (managed by Chapman University), educational (managed by OUSD) and
governmental (managed by the City). The PEG channels are for the exclusive use of the City and
must be carriea on the basic tier. To keep a PEG channel, the City or its designee, must use it for
at least eight hours a day or it can be reclaimed by the video service provider.
Pursuant to the Video Act, a local entity must reauthorize its ordinance in order to continue to
collect PEG fees upon expiration of the State Franchise. Approval of Resolution No, 11003
meets that requirement.
8. ATTACHMENTS
Resolution No. 11003 — A Resolution of the City Council of the City of Orange Reauthorizing
OMC Chapter 13.81 Relating to Cable Franchise Fees.
ITEM
RESOLUTION NO. 11003
A RESOLUTION OF THE CITY COUNCIL
OF THE CITY OF ORANGE
REAUTHORIZING OMC CHAPTER 13.81
RELATING TO CABLE TELEVISION
FRANCHISE FEES.
WHEREAS, in 2006 the California Legislature adopted Assembly Bill 2987, "the
Digital Infrastructure and Video Competition Act of 2006" (the "Video Act ") which
became effective January 1, 2007; and
WHEREAS, under the Video Act any entity using the public right -of -way at least
in part to provide video service (programming services, cable service or open video
services) has the choice of obtaining a franchise with the local agency or a state franchise
until January 1, 2008, after which a state franchise must be obtained; and
WHEREAS, under the new law, a holder of a state franchise may be charged a
franchise fee of five percent of its gross revenue from subscribers within the City's limits,
or the percentage of gross revenue currently paid by incumbent City cable operators,
whichever is less; and
WHEREAS, the Video Act permits the City to adopt an ordinance requiring a state
franchisee to pay an additional one percent of gross revenue for Public, Educational and
Government ( "PEG ") purposes, said ordinance being adopted by the City Council as
Ordinance No. 14 -07 creating Orange Municipal Code Chapter 13.81; and
WHEREAS, pursuant to the Video Act, a local entity must reauthorize its
ordinance in order to continue to collect PEG fees upon the expiration of the state franchise;
and
WHEREAS, the City has been notified of the expiration of Cox Communications
state franchise; and
WHEREAS, this reauthorization of Ordinance No. 14 -07, establishing OMC
Chapter 13.81 will allow the City to continue to claim a five percent franchise fee and a
one percent fee for PEG purposes.
NOW, THEREFORE, the City Council of the City of Orange resolves, finds and
determines, on the basis of the facts set forth in the agenda report presented to it and any
testimony received at the meeting at which this matter was considered, as follows: